Smiths Group shares soar after US fund ValueAct takes a stake

Smiths Group shares shot towards the top of the FTSE 100 yesterday after reports that US activist hedge fund ValueAct has taken a stake in the industrial stalwart.

The conglomerate is following in the footsteps of Rolls-Royce, whose shares soared after ValueAct revealed last week it has taken a 5.4 per cent holding.

Smiths, founded in 1851, has five divisions – Medical, Detection, Interconnect, Flex-Tek and John Crane and makes products from medical devices to airport scanners.

Rising: Smiths Group shares shot towards the top of the FTSE 100 yesterday after reports that US activist hedge fund ValueAct has taken a stake in the industrial stalwart

It has, for a number of years, been seen as a prime target for a sale or break-up, but the efforts of departing chief executive Philip Bowman have been stymied by a pension fund black hole of just under £1billion.

The board has been reluctant to embark on restructuring as any money coming in as a result would have to be handed to the pension trustees.

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Once interest rates start to rise, however – as they are expected to do later this year – the pension fund deficit will for technical reasons automatically reduce, clearing a path for a reorganisation.

The medical division is seen as a candidate for sale as is John Crane, which makes industrial seals. New boss Andrew Reynolds Smith takes the helm in the autumn.

ValueAct, led by investor Jeff Ubben, has a stake of below 5 per cent in Smiths whose shares rose 51p to 1200p or 4.44 per cent, the second biggest rise on yesterday’s FTSE 100. A source said so far ValueAct has attended investor meetings and ‘asked intelligent questions’.

Other large US investors include Harris Associates and Dodge & Cox. A Smiths spokesman said the firm welcomed ‘all new shareholders’.